Norsk Hydro ASA on July 25, 2011, entered into an agreement to divest its 20.86% non-strategic ownership stake in northern Norwegian power production company SKS Produksjon AS to Salten Kraftsamband AS for a cash consideration of NOK 1 billion for the shares.
The sale does not affect Hydro’s ownership of 9.4 TWh of annual power production in Norway.
“The stake in SKS has been a minority position and a financial asset for Hydro yielding an annual dividend of approx NOK 30 million over the past two years. I am pleased with the valuation we have achieved in this transaction,” says Hydro’s CFO Jørgen C. Arentz Rostrup.
“As SKS is located in an area where Hydro has no industrial power consumption and with no synergies to our other power operations, the divestment has no effect on Hydro’s primary aluminium production in Norway. We will continue to develop our captive power assets in Norway over the next years,” Rostrup says.
SKS Produksjon operates solely as a power production company and distributes dividends to its owners on a regular basis. There is no physical power off-take agreement to Hydro and no link to Hydro’s other power assets in Norway. Following the transaction, SKS Produksjon will be fully owned by Salten Kraftsamband.
SKS Produksjon owns nine power stations in Nordland in the northern part of Norway, with a normal annual production of close to 1.8 TWh per year. Around 280 GWh of the production is sold as quota power at cost.
Hydro’s ownership represents about 370 GWh of the total production, or about 310 GWh when adjusted for quota power.
The transaction is expected to be completed on July 26, 2011. Hydro expects to recognize a gain of about NOK 650 million in its third-quarter result, with no material tax expense implications.
Hydro owns 9.4 TWh of renewable hydropower capacity in Norway and is currently executing an upgrade and expansion program with a total investment of about NOK 1.2 billion for the period 2011-2015.